Ch - 3

Entrepreneurial Strategy: Generating and

Exploiting New
Opportunities

Entrepreneurial Strategy: Generating

and Exploiting New Opportunities
New Entry
Offering a new product to an established or new
market, offering an established product to a new
market or creating a new organization.
Entrepreneurial strategy These are a set of
decisions, actions and reactions that first generates
and then is exploited over time, a new entry.
Entry
Strategy

Knowledg
e
Other
Resource
s

Resource
bundle

Assessm
ent of
new opp.

Stage1 : New entry

generation

Risk
reduction
strategy

Firm
performan
ce

Organizati
on
Stage 2: New entry
exploitation

Generation of New Entry Opportunity

Resources as a Source of Competitive Advantage
Resources are the inputs into the production process. And the
first building blocks to a firms functioning and performance.
These resources can be combined in different ways and it
is this bundle of resources that provides a firm its capacity to
achieve superior performance. These are Land, Labor, Capital
and Organization Skills and are the basic building blocks.
Creating a Resource Bundle that is Valuable, Rare and
Inimitable
Entrepreneurial Resource: The ability to obtain and then
recombine, resources into a bundle that is valuable, rare and
inimitable. Knowledge is the basis of this entrepreneurial
resource, which by itself is valuable.
Market Knowledge: Possession of information, technology,
knowhow and skills that provide insight into a market and its
customers.
Market research, such as surveys, has limited effectiveness

Generation of New Entry Opportunity

because it is often difficult for customers to articulate the
underlying problems they have with the product or service.
Market research would not likely to have revealed this
information about the deficiencies in the current
technology, because, it is difficult for people to
articulate the need for something that does not
exist.
Technological Knowhow: The possession of information,
technology, knowhow, skills that provide insight into ways
to create new knowledge. For eg. The computer was
invented 30 years ago and has led to many new entry
opportunities.
For eg: those with expertise in computer software
technology are more able to adapt and improve the
technology and in doing so open up a potentially attractive
market.

Assessing Attractiveness of New Entry

Opportunity

Prior Knowledge and Information Search: This prior

knowledge means that the entrepreneur starts fro a
position of less ignorance about the assessment task at
hand.
Window of Opportunity: This is the period of time when
the environment is favorable for entrepreneurs to
exploit a particular new entry.
Comfort with Making a Decision under uncertainty:
The trade off between more information and the
likelihood that the window of opportunity will close
provides a dilemma for entrepreneurs.
The dilemma involves a choice of which error they prefer
to commit:
Error of commission: Negative outcome from acting
Error of ommission: Negative outcome from not acting

Assessing Attractiveness of New Entry

Opportunity

Decision to Exploit or not to Exploit the New

Entry
Assessment of a new entrys attractivenessDetermining whether the entrepreneur believes he or
she can make the proposed new entry work.
Level
of
Entry Strategy for New
Entry
Exploitation
Search

Knowledg
e
Preference
for error:
Omission or
Commission

information
on new
entry

Window of
Opportunity
still open
Comfort
with
making
decision
under
uncertainty

Go/no go
decision
to exploit
new entry

Entry Strategy for New Entry

Exploitation

First movers develop a cost advantage

First movers face less competitive rivalry
First movers can secure important channels
suppliers & distributors
First movers are better positioned to satisfy
customers a) select and secure the most attractive
segments of a market, b) position themselves at the center
of the market, providing an increased ability to recognize
and adapt to changes in the market, c) establish their
product as the industry standard.
First movers gain expertise through participation
a) learn from the first generation of products and improve,
product design, manufacturing and marketing, b) monitor
changes in the market that might be difficult or impossible
to detect for those firms not participating in the market, c)
build up their networks which can provide early info about
attractive opportunities.

Environmental Instability and First Mover

(Dis) Advantages
Key success factors The requirements that any firm
must meet to successfully compete in a particular
industry
Emerging industries are more prone to environmental
changes as the rules of the game would not have been
set and would be highly flexible .
Demand Uncertainty Considerable difficulty in
accurately estimating the potential size of the market,
how fast it will grow and the key dimensions along which
it will grow. As such, it remains a trial and error system till
the market settles down post which estimations could
start.
Technological Uncertainty Considerable difficulty in
accurately assessing whether the technology will perform
and whether alternate technologies will emerge and
leapfrog over current technologies.

Environmental Instability and First Mover

(Dis) Advantages
Adaptation Changes in market demand and technology do
not necessarily mean that first movers cannot prosper.
What is meant is that first movers, after a while, need to
adapt to the new environmental conditions. It may be difficult
to move away from the accepted configuration.
In addition, the entrepreneurial initial attributes of
persistence and determination can inhibit the ability of the
entrepreneur to detect and implement change.
Customers Uncertainty and First Mover (Dis)
advantages
Customers may have considerable difficulty in accurately
assessing whether the new product or service provides value
for them.
Reduce customer uncertainties: Therefore, offering a
superior product is not sufficient to enable a first mover to
make sales; the entrepreneur must also reduce customer
uncertainties. One solution would be to offer

Environmental Instability and First Mover (Dis) Advantages

informational advertisements/ brochures/CD etc.

lack a frame of reference : However, providing
customers with information on the performance of a new
product does not always work. When the new product is
highly innovative, as the products that create a new
market, the customers may lack a frame of reference
for processing the information (any new product) Teflon.
Uncertainty: Potential customers uncertainty may also
stem from the broader context in which the product is to
be used. For eg even if the potential customers
understand how the product performs, they are unlikely to
purchase a product until they are convinced that the
product is consistent with enabling product, systems and
knowledge. For eg a SW package learning.
What is important as a First Mover is to enable an
educational effort.

Environmental Instability and First Mover (Dis) Advantages

Lead Time and First Mover (dis) Advantages

Unless an entrepreneur can stop or retard potential
competitors from entering the industry and offering
similar products, the initial advantage will be quickly
eroded.
Lead time can be extended if the first mover can extend
the barriers of entry:
1. Building Customer loyalties Bata Ltd, Smart phones?
2. Building switching costs Locking customer loyalties
3. Protecting product uniqueness continuance of
advantage
4. Securing access to important sources of supply and
distribution
. These barriers to entry can reduce the amount of
competition faced by the first mover.
. However competition is not bad in the long run.

Risk Reduction Strategies for New

Entry Exploitation
Imitation Strategies
Copying the process and practices of other firms.
Imitating some of the practices of established
successful firms can help the entrepreneur develop
the skills necessary to be successful in the industry,
rather than attempting to work out which skills are
required and develop these skills from scratch.
Types of Imitation Strategy
Franchising Mc Donalds, Burger King
Me Too Copying products that already exists and
attempting to build an advantage through minor
variations Kwality Ice Creams, Baskin Robbins.
Case for discussion Sanjeev Bikhchandani